Make your Portfolio glow with an Investment Property Home Equity Line of Credit
Homeowners all around can take advantage of their property’s equity to improve their living space or make other investments. If you are a homeowner and you didn’t know this yet, these lines of credit can be used for real estate investments as well. Depending on your amount of equity, you may
increase your value further on.
Let’s start by explaining what a Properties Home Equity Line of Credit is. Or HELOC for short.
This line of credit acts pretty much like a credit card. You will gain access to a certain amount of money that you can use and gradually repay. The difference is your home property stands behind this credit to secure it. This means that in case you are unable to repay the amount you used, the lender can lawfully seize your home. In specific terms, such lines of credit are called LOCs and the right over your home in case of not paying back is called a lien.
Secondly, let’s see what types of Lines of Credit are available on Investment property
General Information about our HELOC
As the name suggests, this line of credit is against one property. As of the date of this article, the line of credit you can secure you can only be against a primary residence or a second home (vacation home). You only pay interest for the amount you use of the home equity line.
Your property needs to meet some requirements as well in order to qualify for a line of credit. It needs to be a 1 to 2 unit single-family home, Condo or townhome. The home you apply to use for equity funds must be your primary residence or your vacation home. Your debt to income ratio cannot exceed 45% and the total loan to value against the home cannot exceed 89.99%. Therefore you must have 10.01% equity in the home after your 1st lien and the proposed HELOC are combined. We require a 700 mid credit score for the primary wage earner to go up to the full 89.99% Loan to Value for his primary residence. For a Second or Vacation home, we can go up to 85% LTV with a 730 score. This investor will grant no exceptions. NO minimum FICO score needed for co-borrowers.
The maximum lien amount against the home cannot exceed $2,000,000. The minimum HELOC amount is $5,000 and the maximum is $500,000 for a primary up to 85% loan to value. If your primary home needs the maximum loan to value of 89.9%, we can do a maximum 2nd loan amount of $350,000. There is no minimum withdrawal amount at the time of the HELOC closing.
Purchasing an Investment Property with a HELOC
Once you've secured the Home Equity Line of Credit on your primary or second home, you can now use those funds for a down payment on an investment property. Just be sure that you know your future HELOC payment after your withdrawal. That new monthly HELOC payment will have to be added to your total debt to income ratio during the purchase of the investment property. Thusly, you'll want to make sure you can qualify for the investment purchase with this new HELOC payment included.
Other Important Information to know re: HELOCs
There is no reserve requirement for this HELOC. It will go behind any current first or new first lien amount.
No foreclosure or short sale allowed within the last 5 years.
No bankruptcy filing in the last 7 years. Yes, we count from the filing date for this program. In contrast, other programs don't start counting until the date of discharge.
There is a $75 annual maintenance fee. You are responsible for closing costs which are comprised of $295 origination fee & the county recording fee. The closing costs, however, are subject to change.
Take cash out of your equity & there is no amount of time you need to be on title to do so. Also known as no seasoning requirements.
For new home purchases, we may use the appraisal in that transaction for up to 120 days. Otherwise, after 120 days the investor will require a new appraisal to determine the new LTV.
How to apply for this type of line of credit
First of all, look at your investment properties, your financial status, and future goals. Do you own a single property of moderate value or a wide portfolio of highly-valued properties!?
Secondly, arrange your documents and required papers. Having everything ready will make the process smoother. Make sure you have proof of property ownership and any documents on mortgages or liens. Bank statements and credit rating will also need to be presented on request on the lender.
Some of those necessary documents include the following:
- Driver's license & social security cards for everyone applying for the loan
- A signed & dated borrowers authorization that I can email you (contact me for form firstname.lastname@example.org)
- Your most recent 2 years worth of tax returns with all pages and schedules
- Most recent 2 years W-2s and or 1099s that go with the tax return years
- The most recent 30 days worth of check stubs
- Your most recent 2 months worth of bank statements
- Most recent mortgage statements for all properties that you own
- The most recent annual hazard insurance bill for all the homes you own
- Your most recent annual homeowner's association bill for all the homes you own
- Most recent appraisal if dated within the last 120 days
I can also help you become pre-approved at the same time for purchasing that investment property.
Finally, that way you know in advance that you will qualify for the investment after you've secured your HELOC.
Once you’ve managed to get everything ready,
Contact Casey Moseman @ 702-271-1274
You can initiate the process and watch it unfold!